Royal Bank of Canada (RBC) plans to retrofit the Canadian retail banking branches it controls with low-carbon heating and cooling systems, a move estimated to slash the greenhouse gas emissions per site by 70 per cent.

RBC (RY-T) will make the changes to 62 per cent of its approximately 1,200 branches, taking steps to replace natural gas- or propane-powered HVAC equipment with heat pumps that run on electricity.

The upgrades to its bank branches are one of the largest corporate real estate decarbonization efforts in Canada, RBC says. It is estimated to slash 10,000 tonnes of carbon emissions.

The first phase will consist of a $35-million investment over three years, with work expected to begin in the spring of 2025. The retrofits are expected to be finished by 2035. 

“The reason we really decided to embark on this is approximately 40 per cent of our operational emissions come from our retail locations across Canada," Jon Douglas, the director of RBC’s global climate and sustainability operation, said in an interview with Sustainable Biz Canada.

"It’s one of the largest pieces and sources of emissions. This is part of advancing towards net-zero operations.”

RBC has a global real estate footprint of 22 million square feet.

The impact of the RBC retrofits

Space heating is estimated to generate 85 per cent of carbon emissions in commercial buildings, an RBC report on the net-zero transition states.

“One of the largest opportunities to reduce emissions within our operations and the branches is converting all of these units,” Douglas said.

Pilot retrofits were carried out earlier this year, and resulted in “minimal interruption to the branch location.” The bank did face the problem of some locations lacking the electrical capacity for a fully electric heating system, so it upgraded those buildings' electrical service or panels to enable the change.

The first phase of funding is aimed to show RBC’s commitment to decarbonizing HVAC systems and give heat pump manufacturers the confidence the bank will be purchasing long-term, Douglas said.

RBC has not finalized how many branches Phase 1 will cover. The starting date of future phases is also uncertain, as is the total cost of the retrofits. Government incentives to support heat pump adoption will not be accessed; RBC will be solely funding the program.

As RBC cannot control 38 per cent of its Canadian bank branches because they are owned by other parties, the bank is taking steps to understand the owners’ climate targets and find areas for collaboration, Douglas said. RBC is working with Cadillac Fairview to achieve net-zero emissions at a flagship office in Toronto by 2040, for example.

RBC’s shift to greener buildings

RBC’s 2025 climate targets relevant to its buildings include a 70 per cent reduction in its operational greenhouse gas emissions against a 2018 baseline, and to use entirely renewable and non-emitting sources of electricity.

To address sources of climate-warming pollution in its owned and leased buildings, RBC is investing in smart building technology, LED retrofits, energy efficiency measures and on-site solar projects, according to its Climate Report 2023.

The heat pump retrofits cover primarily Scope 1 emissions. In 2023, RBC emitted 23,873 tonnes of carbon dioxide equivalent (tCO2e) in Scope 1 emissions (from its fuel consumption) and 63,713 tCOe2 of Scope 2 emissions (electricity consumption offset by renewable energy certificates).

RBC has made a four per cent cut to its Scope 1 emissions compared to its 2018 baseline, but has seen the figure increase by four per cent and 13 per cent compared to 2022 and 2023, respectively.

As for Scope 2 location-based emissions (consumption at sites), RBC has decreased it by 38 per cent since 2018; three per cent since 2022; and 10 per cent since 2021.

But on the market side that accounts for contract agreements, all of RBC’s properties are powered by renewables through power purchase agreements and renewable energy certificates as of 2023, enabling the company to report having zero market-based emissions.

Most of RBC’s greenhouse gas emissions are derived from its lending and investments. For example, its oil and gas financing reached a total of 71.4 million tCO2e in 2023, accounting for the majority.

RBC plans to procure more renewable energy as it supports fuel switching, Douglas said.